Insight into Resolving Construction Disputes by Mediation/Adjudication in Hong Kong

Resolving construction disputes using an adversarial approach is considered to be in opposition of the maintenance of a harmonious relationship between two parties. The modern arbitration process may emulate the litigation proceeding leading to delay and cost escalation. During the past decade, the Hong Kong Government has implemented a mediation clause as an alternative mode for settlement of construction disputes. In this paper, the experience and insight into resolving construction disputes by integrating mediation and then arbitration in Hong Kong are highlighted. The state-of-the-art modern mediation process and its philosophical origins are reviewed. The shortcomings of the present system are pinpointed. The success of the adjudication now practiced in the United Kingdom may suggest that there is a place for another process of dispute resolution, which may help improve the situation. The prospect of the proposed mediation/adjudication and then arbitration mechanism is discussed with particular reference to the construction industry in Hong Kong.     

Adjudication: Temporary Binding and Tiered Dispute Resolution in Construction and Engineering: Hong Kong Experience

Hong Kong (under the “One Country Two Systems” Policy, Hong Kong, although an administrative region of the PRC operates a separate legal system, whose roots lie in the English common law system) has a justified reputation for being at the forefront of developments in techniques to avoid and resolve disputes in the construction industry. [This is illustrated by the adoption of the UNITRCAL Model Law by the Arbitration (Amendment) Ordinance 1996, specific powers given to Arbitral Tribunals under the Arbitration Ordinance (Cap. 341) including powers to consolidate, and the development of the dispute resolution adviser system. See the genesis, development and future use of the dispute resolution adviser system by Colin J Wall, Hong Kong Society of Construction Law dated November 17, 2004]. However, it has not, to date, seen the widespread adoption of adjudication as a means of resolving disputes. This article examines the history of the use of adjudication in Hong Kong, current trends, and offers some possible reasons for the limited adoption of adjudication.     

Evolution of Statutory Adjudication as a Form of Dispute Resolution in the U.K. Construction Industry

This paper reports on the rapid growth in the use of this form of dispute resolution and its apparent decline. It considers how this novel form of dispute resolution has changed in nature from its original limited role of providing a speedy and inexpensive process of resolving disputes so that cash could flow in the industry and be of help primarily to those in the lower reaches of the subcontracting chain into a highly developed legal process which has increasingly been utilized for large and contractually complex disputes. Statutory adjudication is still used extensively in the U.K. construction industry as the method of choice to resolve disputes, many of which would previously have gone to court or to arbitration. Data for this study were provided by the Adjudication Reporting Center at Glasgow Caledonian University.     

Construction Adjudication in the United Kingdom: Past, Present, and Future

Adjudication was enacted in the Housing Grants, Construction and Regeneration Act (1996) as a means of improving payment practices in the U.K. construction industry. It is a statutory right that can be invoked unilaterally at any time on a construction contract that is in writing and is a quick (28?days) and usually inexpensive alternative to arbitration or litigation covering all manner of disputes. Construction adjudication has developed from zero in 1998 to 2,000 cases in the year 2002 reducing to about 1,500 cases per annum currently. Construction adjudication produces a decision that is “temporarily binding” and will be enforced by the courts until the substantive issues in dispute are resolved by litigation, arbitration, or agreement. The principles of natural justice apply but the courts apply them pragmatically because of the statutory time scales. The adjudicator may get the decision wrong. The courts will still enforce the Decision. A dispute must exist for adjudication to be invoked. A governmental review of the Act has resulted in recommendations including extending adjudication to oral contracts.     

Perspective from the United States: Tensions between “Getting It Done” and “Getting It Right”

For over 2 decades, and in response to complaints that arbitration was too expensive and too time consuming, the American construction bar has been energetic and innovative in developing a broad array of dispute resolution tools for resolving construction disputes. These “tools” have included “partnering,” mandatory negotiations, interim decision making by design professionals, mediation, standing neutrals and dispute resolution boards, minitrials, early neutral evaluation, and expert determinations, all developed as alternatives to arbitration and litigation. More recently, in 2006, a voluntary “fast track” process for resolving construction disputes within 100?days has been proffered by the CPR Institute for Conflict Prevention and Resolution. Yet, there are certain dynamics or “tensions” inherent within, and associated with, all construction disputes that continue to resist efforts to speed up dispute resolution processes; these tensions must be reconciled or taken into account before any fast track or “adjudication”-type process will be generally accepted in the United States construction industry. Thus, for now and in the foreseeable future, there will continue to be a smorgasbord of dispute resolution processes for resolution of construction disputes. This is a good thing, because parties to construction disputes come with a great variety of appetites and needs. The focus of attention should be, not so much on development of the ideal or best dispute resolution tool, but having a willingness to select the “best tool for the job,” after the nature of the dispute is known.     

Progress of Statutory Adjudication as a Means of Resolving Disputes in Construction in the United Kingdom

This paper reports on a longitudinal study on the progress of statutory adjudication in the United Kingdom since its commencement in 1998. This study was carried out by the Adjudication Reporting Centre at Glasgow Caledonian University and it considers the statistical data provided by both Adjudicator Nominating Bodies and adjudicators themselves. Various trends are shown and reasons explored. These trends include the growth in adjudication referrals, numbers of adjudicators, causes of disputes, sums of money in dispute, seasonal trends, monitoring of adjudicators’ performance, procedures adopted, time limits, fees, etc. There is evidence that the disputes, while still predominantly about payment and valuation issues, are becoming larger and more complex. The impact of statutory adjudication on other forms of dispute resolution is considered.     

International Construction Dispute Adjudication under International Federation of Consulting Engineers Conditions of Contract and the Dispute Adjudication Board

The role of institutional arbitration has become significantly less commercially viable in the international construction industry as a primary means of dispute resolution because of the uniqueness of the construction process. As a result, the construction industry has developed an innovative form of primary dispute adjudication called the Dispute Adjudication Board (DAB). This paper will show the need for an efficient dispute resolution process because of the globalization of the construction industry. It will focus on the standard contract forms of the Féderation Internationale des Ingénieures-Conseils (International Federation of Consulting Engineers) (FIDIC), which are widely used in international construction projects. The paper will then discuss recent developments in the FIDIC, including the development of the DAB to address the fundamental need for a commercially viable means of construction dispute adjudication.     

What do disputants want? Preferences for third party resolution procedures.

Traditional adjudicative procedures for resolving small claims disputes have been augmented with less formal means of dispute resolution including arbitration and mediation. Exp 1 (74 undergraduates) investigated initial preferences and perceptions of the consequences that are likely to follow adjudication, arbitration, and mediation. Results revealed that Ss preferred mediation over adjudication. Mediation was viewed as having greater interpersonal focus, while adjudication was perceived as more fair and solution focused. Exp 2 (122 undergraduates) examined the impact of 3 dispute characteristics (strength of position, nature of relationship, other party's cooperativeness) on preferences for mode of resolution. Overall, preference was mediated by case strength, with differences in case strength related to perceived differences in the extent to which the various procedures would facilitate a favorable outcome. (French abstract) (PsycINFO Database Record (c) 2010 APA, all rights reserved)     

Adjudication: Singapore Perspective

Adjudication was introduced into Singapore under the Building and Construction Industry Security of Payment Act of 2004. The Singapore regime is the seventh of its kind, taking after the precedent regimes in the United Kingdom, Australia (in the states of New South Wales, Queensland, Victoria, and Western Australia), and New Zealand. The adjudication regime in Singapore most closely resembles the regime in New South Wales under the Building and Construction Industry Security of Payment Act of 1999. Based on the statistics currently available, it would appear that the Singapore regime has enjoyed some success thus far in achieving its policy objectives of expediting payment and improving cash flow within the construction industry. There is some indication that this has been due to a positive change in the underlying mindset towards payment in the construction industry. Nevertheless, it remains to be seen whether this success can be sustained and improved upon. This may have wider implications including a possible reduction in the use of litigation and arbitration proceedings for resolving construction payment disputes in Singapore.     

Mediation∕Arbitration: Alternative Dispute Resolution Process

Interest in alternative dispute resolution (ADR) techniques for the construction industry has grown in recent years. Traditional litigation has been criticized on several fronts. The traditional procedures are often cumbersome, expensive, and lengthy. The outcome of litigation is uncertain and often confusing. For certain cases, alternative procedures may be useful in quickly resolving disputes. Sometimes there is no alternative to litigation. Each case is unique, and the appropriate form of dispute resolution mechanism must be established for each project. This paper reviews the process of mediation∕arbitration, and compares that process to other alternative dispute resolution procedures.     

Dispute Resolution in the Construction Industry in Ireland: A Move to Adjudication?

Dispute resolution in the construction industry in Ireland is about to change radically with the introduction of the new Public Works forms of contract. Traditionally, Ireland has had an image of being able to resolve disputes by the use of informal channels and recourse to formal dispute resolution was seen as something to be avoided. Will this now change? This paper reviews the forms of dispute resolution which have traditionally been used in Ireland and details the new form of dispute resolution which is to be introduced. The new form of dispute resolution is unique and does not fit easily into any standard dispute resolution category. How will this dispute resolution procedure operate in practice and how will it affect the ability of parties to resolve disputes? This paper intends to provide an insight into the answers to these questions.     

ADR: Trial Lawyer's Perspective

Despite the current publicity and popularity of alternative forms of dispute resolution (ADR), trial lawyers are urging a careful evaluation of the trade‐offs involved in choosing between traditional adjudication and ADR, both in general and in construction disputes specifically. The writer first presents recent evidence that casts some doubt on the justification for complaints against our system of formal litigation. He then discusses the major factors to be weighed in choosing between traditional adjudication and an ADR technique by parties involved in construction disputes. Among the factors considered are costs, certainty, sufficiency of information, the right of review, privacy, and guidance. He concludes with the contention that arbitration and other ADR techniques can be advantageous in many cases, so long as they are voluntary rather than mandatory.     

Contingencies in the mediation of disputes.

Although it is widely recognized that the behavior of mediators in resolving disputes is often contingent on the characteristics of disputes, little systematic research has examined mediators' perceptions of the contingent use or effectiveness of their behavior. We surveyed 255 professional mediators about the features of the disputes they encountered, the tactics they used, and the outcomes they achieved in their most recently completed case. Confirmatory factor analysis was used to test a hypothesized factor structure for mediator behavior, and exploratory factor analyses provided information about the underlying structures of dispute features and mediation outcomes. The results of the factor analyses served as the basis for an assessment of perceived contingencies among dispute sources, mediator tactics, and outcomes. The results of correlational analyses suggest that the mediators used many tactics contingently. The results of moderated multiple regression analyses indicate that mediators believed some tactics were effective in certain dispute situations and not in others. Tactics viewed as positively related with success in some disputes were viewed as unrelated or even negatively related with success in other disputes. (PsycINFO Database Record (c) 2010 APA, all rights reserved)     

Case Study as to the Effectiveness of Dispute Review Boards on the Central Artery/Tunnel Project

The most prevalent use of the dispute review board (DRB) process in the United States to date is the central artery/tunnel project located in Boston. A DRB is a three-member panel jointly chosen by the contractor and owner that is present throughout the course of the contract, and whose responsibility it is to hear disputes contemporaneously with their occurrence. This paper reviews the efficacy of the DRB on the central artery/tunnel project answering such questions as to whether or not (1) there was any discernable bid savings between DRB and non-DRB contracts; (2) the DRB was successful in resolving all disputes prior to contract completion; (3) were there any barriers to the DRB’s effectiveness, concerning bid savings; and (4) the DRB reduced the costs of resolving disputes. The questions are timely and important in an industry that looks for new ways to reduce construction costs and values timely prevention and resolution to disputes.     

Quantification of Costs for Dispute Resolution Procedures in the Construction Industry

The extent to which disputes affect the construction industry has been well-documented. There are a plethora of anecdotal stories, and even some data that explain how unresolved conflict can impact project cost, schedule, and quality. In response, many systems and procedures have been developed to address disputes and their resolution within the construction industry. However, no data exist that quantitatively compare these various alternatives and the real costs of resolving a dispute using methods other than litigation. This paper presents a framework for identifying and capturing the transactional costs incurred to resolve disputes throughout the full spectrum of resolution options. Transactional cost data from 46 recently completed construction projects, totaling over $2 billion of total installed costs, confirm that these sums can account for a large portion of the settlement/award amount, the original claim amount, and even the total contract value when using some dispute resolution methods. Furthermore, using dispute trend and cost data, a comprehensive dispute management system based upon the concepts of risk management is proposed, highlighting the overriding objective of promoting dispute avoidance/resolution in the most cost-efficient manner possible.     

Adjudication in the United Kingdom: Constitutional Implications

Good ideas are often overtaken by great events. That happened to adjudication. Originally envisaged as a single concept applying across the United Kingdom, it has been overtaken by more significant constitutional change. This paper takes a look at that process. Something of a parallel could perhaps be drawn with the individual states in the United States each introducing a similar form of legislation. The possibility exists, of course, of each area adopting a different approach but the indications are that certain communality is developing in adjudication and it is, perhaps, a measure of the success of the concept of adjudication that it is being voluntarily adopted in other dependency areas such as the Isle of Man.     

MAUT-Based Dispute Resolution Selection Model Prototype for International Construction Projects

Disputes are common in international projects because of contractual, cultural, and legal factors. The dispute resolution methods currently adopted in international projects are varying, including litigation, arbitration, adjudication, mediation, expert-determination, dispute resolution board, and minitrial. The problem in question is on how to select the most appropriate resolution method that can fit nicely in the nature of the dispute and the disputing parties’ needs. A dispute resolution selection prototype (Model) based on the analytical hierarchy process and multiattribute utility technique (MAUT) is presented in this paper. The Model developed consists of five components: Selection factors, dispute resolution methods, utility factors, relative importance weightings, and user’s preferred weightings. These were based on the quantitative data provided by 41 experts in the field, who were barristers, arbitrators, mediators, and project managers. The Model is considered beneficial to the industry, as it provides construction professionals with a systematic and objective approach in the management of international project disputes.     

Alternative Dispute Resolution in U.S. Public Works: Proposed Model

Alternative dispute resolution (ADR) is rapidly becoming a mainstream option to traditional litigation in the United States. Its effectiveness in resolving private-sector construction disputes has been proven, and its benefits, for the most part, uncontroverted. Sufficient attention, however, has not been given to adapting ADR for use on public projects. Public construction operates in a unique context, where the institutional realities facing a public owner can undermine the effectiveness of even the most promising ADR method. This paper discusses the characteristics of ADR, its acknowledged benefits, and the extent of our present ability to realize those benefits in public construction. Measures for tailoring ADR for its effective use in the public sector are offered.     

Case for Expanding the Claim Dispute Resolution Training of TxDOT Personnel

Texas Department of Transportation (TxDOT) currently uses general alternative dispute resolution and dispute management tactics to resolve construction claims. The successful application by TxDOT of project partnering methods, critical path management, and the Contract Claims Committee has resulted in a relatively low number of claims filed. However, one weakness in TxDOT’s current methodology is the lack of specific protocol for project-level personnel and administrators. The following survey of TxDOT dispute resolution methods emphasizes the importance of developing a personnel training catalog for Area Engineers in order to avoid costly claim dispute escalation. As the individual primarily responsible for resolving project and district-level disputes, the Area Engineer should be equipped with dispute resolution training if TxDOT wishes to improve the efficiency of its alternative dispute resolution protocol.     

Computerized DSS for Construction Conflict Resolution under Uncertainty

Due to the inherent nature of construction projects, conflicts are unavoidable among the various parties involved. Such conflicts often delay projects and cause losses for all parties. This paper presents the development of a decision support system (DSS) to help in resolving construction disputes. The DSS integrates the elimination method to shortlist promising resolutions to a conflict, the graph model for conflict resolution to determine the best resolution that satisfies all decision makers’ preferences, and the information gap theory to consider uncertain decision preferences. A prototype system has been developed and a case study of a construction conflict used to demonstrate its features. The presented methodology for construction conflict resolution is useful for both researchers and practitioners to better deal with the dispute-prone nature of the construction industry under uncertainty and lack of information. In this paper, the proposed prototype successfully simulated and predicted the sequence of decisions that took place in the case study dispute, in the presence of uncertainty.